Brexit, London, & UK Urban Markets

Brexit, London, & UK Urban Markets · June 27, 2017

Policy Brief

While there has naturally been focus on the impact of Brexit on London, last week’s vote to leave the European Union is a bitter pill for all the major cities across the United Kingdom.

In a dynamic familiar to observers of current American politics, the vote broke down along an urban and rural divide. The “Remain” coalition largely consisted of some of the UK’s largest cities—Manchester, Glasgow, Leeds, and Edinburgh—while even those who unexpectedly voted to leave—Birmingham and Sheffield—did so by a very thin margin.

The unfortunate irony is that while some have characterized the drivers of the “Leave” vote both as anti-EU integration and “anti-London” sentiment, it comes at a time when the country’s secondary cities are benefiting from a new localism, enabled by the central government and supported in many ways by EU investments and by access to a common market.

Take Manchester, whose 2014 devolution agreement with the central government granted local control over transportation, planning, housing, and regional economic development to a newly instituted city-mayor. The economy in the city is growing around an innovation corridor that supports nearly 12 percent of the regional workforce, anchored by the Graphene Institute at the University of Manchester, which received nearly half of its £61m total cost from EU development funds.

Sheffield struck a similar agreement that grants £900m to the city-region to take control of a range of policy areas, under a mayor to be elected in 2017. At the same time, the economy is evolving beyond its industrial roots, led by the Advanced Manufacturing Research Park, which is focused on high-value, research-intensive processes. That initiative benefited not only from investments from the European Regional Development Fund, but also the strong international IP and regulatory environment that the EU provides. This certainty enabled the Research Park’s environment of “open innovation,” which encourages collaboration among international corporations based in the US, Germany, Japan and elsewhere.

Still more communities across the UK relied on EU funds for numerous projects. As Liverpool Mayor Joe Anderson attested to this morning, £285 million has been invested in his region over the past decade by the EU, with an additional £190 million committed over the next 5 years in support of skills programs, with more funding coming for sustainable infrastructure and housing projects.

This model—with national and supranational governments providing resources to support distinctive local economies—is the best way forward and the UK government will need to replace these lost investments. Still, the economies of these cities will suffer without access to the large pool of skilled labor within the European Union (15 percent of university employees in the UK are citizens of other countries) or to strategic platform investments that create centers of excellence for new technologies not just within the UK, but within the entire European continent.

Clearly, the push toward decentralization of power and resources was too little, too late to assuage the resentment directed at Whitehall and Brussels by many in the UK, but the government would be wise to continue their efforts.

The vote has already led to calls for increased devolution to the so-called Northern Powerhouse of UK cities. Yet, while pushing for more formal powers and local control, political leaders across the UK must also understand the importance of strategic collaboration with the rest of the country, and, indeed, the continent. If formal integration is no longer possible, city leaders who understand that the competitiveness of the UK economy will continue to be tied to that of the continent have an even bigger job to do.

Three years ago in “The Metropolitan Revolution“, we called for the creation of a modern Hanseatic League—of cities that trade together, share distinct economic identities, routinize markets for global capital, and exchange innovations across national borders. If there was ever a time for such an effort of subnational internationalism, it is now, and the UK’s cities must lead. Examples could be linking Sheffield’s innovation corridor with similar advanced manufacturing clusters in Stuttgart and Munich, or connecting Manchester’s life science and creative hub with peers in Barcelona, Stockholm, and Geneva.

The barriers posed by being on the outside of the European Union are real, but British cities can’t afford a “Britain First” mentality.

This post was co-written with Brookings senior policy analyst and advisor Alex Jones and originally appeared on Brookings’s The Metropolitan Revolution blog.

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